BILL NUMBER: SB 1572	CHAPTERED  09/26/00

	CHAPTER   666
	FILED WITH SECRETARY OF STATE   SEPTEMBER 26, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 24, 2000
	PASSED THE SENATE   AUGUST 25, 2000
	PASSED THE ASSEMBLY   AUGUST 21, 2000
	AMENDED IN ASSEMBLY   AUGUST 7, 2000
	AMENDED IN ASSEMBLY   JUNE 21, 2000

INTRODUCED BY   Senator Alarcon

                        FEBRUARY 18, 2000

   An act to amend Sections 65863.10 and 65863.11 of the Government
Code, relating to housing.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1572, Alarcon.  Housing assistance:  termination:  notice.
   Existing law, known as Section 8 of the United States Housing Act
of 1937, and other provisions of federal law, provide for housing
assistance payments pursuant to contract to aid low-income families,
and authorize loans, insurance, and interest reduction payments to
assist in the provision of housing.  Section 8 requires the owner of
an assisted dwelling unit to notify the tenant not less than 90 days
prior to the termination, as defined, of the assistance contract.
Existing law also generally prescribes the notice to be given by a
landlord or tenant to terminate a tenancy.  Existing law requires
until January 1, 2002, at least 9 months advance notice, as
specified, to tenants, to the city or county and public housing
authority, and to the Department of Housing and Community Development
when the above-described forms of federal financial assistance are
to be terminated or prepaid with respect to a multifamily rental
housing development.
   Existing law requires until December 31, 2000, an owner to give
specified entities an opportunity to purchase the development upon
terms that represent a bona fide intention to sell.
   This bill, instead of the 9-month notice period, would require
specified notices at least 12 months and at least 6 months in advance
of the termination to be sent to the tenant and affected public
entities, as defined.  The bill would revise the definition of
termination to include a decision to terminate rental restrictions
for an assisted housing development, and would revise various
conditions that must be met regarding offers to purchase an assisted
housing development.
   This bill would extend the operation of those provisions until
January 1, 2011, and would make related changes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 65863.10 of the Government Code is amended to
read:
   65863.10.  (a) As used in this section, the following terms have
the following meaning:
   (1) "Affected public entities" means the mayor of the city in
which the assisted housing development is located, or, if located in
an unincorporated area, the chairperson of the board of supervisors
of the county; the appropriate local public housing authority, if
any; and the Department of Housing and Community Development.
   (2) "Affected tenant" means a tenant household residing in an
assisted housing development, as defined in paragraph (3), at the
time notice is required to be provided pursuant to this section, that
benefits from the government assistance.
   (3) "Assisted housing development" means a multifamily rental
housing development that receives governmental assistance under any
of the following federal programs:
   (A) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance,
under Section 8 of the United States Housing Act of 1937, as amended
(42 U.S.C. Sec. 1437f).
   (B) The following federal programs:
   (i) The Below-Market-Interest-Rate Program under Section 221(d)(3)
of the National Housing Act (12 U.S.C. Sec. 1715l(d)(3) and (5)).
   (ii) Section 236 of the National Housing Act (12 U.S.C. Sec.
1715z-1).
   (iii) Section 202 of the Housing Act of 1959 (12 U.S.C. Sec.
1701q).
   (C) Programs for rent supplement assistance under Section 101 of
the Housing and Urban Development Act of 1965, as amended (12 U.S.C.
Sec. 1701s).
   (D) Programs under Section 515 of the Housing Act of 1949, as
amended (42 U.S.C. Sec. 1485).
   (E) Section 42 of the Internal Revenue Code.
   (4) "City" means a general law city, a charter city, or a city and
county.
   (5) "Prepayment" means the payment in full or refinancing of the
federally insured or federally held mortgage indebtedness prior to
its original maturity date, or the voluntary cancellation of mortgage
insurance, on an assisted housing development described in
subparagraph (B) of paragraph (3) that would have the effect of
removing the current low-income affordability restrictions contained
in the applicable laws and the regulatory agreement.
   (6) "Termination" means an owner's decision not to extend or renew
its participation in a federal subsidy program for an assisted
housing development described in subparagraph (A) of paragraph (3),
either at or prior to the scheduled date of the expiration of the
contract, or a decision to terminate the rental restrictions for an
assisted housing development described in subparagraph (E) of
paragraph (3), that may result in an increase in tenant rents or a
change in the form of the subsidy from project-based to tenant-based.

   (b) (1) At least 12 months prior to the anticipated date of
termination of a subsidy contract, termination of rental
restrictions, or prepayment on an assisted housing development, the
owner proposing the termination or prepayment of governmental
assistance shall provide a notice of the proposed change to each
affected tenant household residing in the assisted housing
development at the time the notice is provided and to the affected
public entities.  The notice shall contain all of the following:
   (A) In the event of termination, a statement that the owner
intends to terminate the subsidy contract or rental restrictions upon
its expiration date, or the expiration date of any contract
extension thereto.
   (B) In the event of prepayment, a statement that the owner intends
to pay in full or refinance the federally insured or federally held
mortgage indebtedness prior to its original maturity date, or
voluntarily cancel the mortgage insurance.
   (C) The anticipated date of the termination or prepayment of the
federal program, and the identity of the federal program described in
subdivision (a).
   (D) A statement that the proposed change would have the effect of
removing the current low-income affordability restrictions in the
applicable contract or regulatory agreement.
   (E) A statement of the possibility that the housing may remain in
the federal program after the proposed date of termination of the
subsidy contract or prepayment if the owner elects to do so under the
terms of the federal government's offer.
   (F) A statement that other governmental assistance may be provided
to tenants residing in the development at the time of the
termination of the subsidy contract or prepayment.
   (G) A statement that a subsequent notice of the proposed change,
including anticipated changes in rents, if any, for the development,
will be provided at least six months prior to the anticipated date of
termination of the subsidy contract or prepayment.
   (H) A statement of notice of opportunity to submit an offer to
purchase, as required in Section 65863.11.
   (2) Notwithstanding paragraph (1), if an owner provides a copy of
a federally required notice of termination of a subsidy contract or
prepayment at least 12 months prior to the proposed change to each
affected tenant household residing in the assisted housing
development at the time the notice is provided and to the affected
public entities, the owner shall be deemed in compliance with this
subdivision, if the notice is in compliance with all federal laws.
However, the federally required notice need not satisfy the
requirements of Section 65863.11.
   (c) (1) At least six months prior to the anticipated date of
termination of a subsidy contract or prepayment on an assisted
housing development, the owner proposing the termination or
prepayment of governmental assistance shall provide a notice of the
proposed change to each affected tenant household residing in the
assisted housing development at the time the notice is provided and
to the affected public entities.
   (2) The notice to the tenants shall contain all of the following:

   (A) The anticipated date of the termination or prepayment of the
federal program, and the identity of the federal program, as
described in subdivision (a).
   (B) The current rent and anticipated new rent for the unit on the
date of the prepayment or termination of the federal program.
   (C) A statement that a copy of the notice will be sent to the city
or county, or city and county, where the assisted housing
development is located, to the appropriate local public housing
authority, if any, and to the Department of Housing and Community
Development.
   (D) A statement of the possibility that the housing may remain in
the federal program after the proposed date of subsidy termination or
prepayment if the owner elects to do so under the terms of the
federal government's offer.
   (E) A statement of the owner's intention to participate in any
current replacement federal subsidy program made available to the
affected tenants.
   (F) The name and telephone number of the city, county, or city and
county, the appropriate local public housing authority, if any, the
Department of Housing and Community Development, and a legal services
organization, that can be contacted to request additional written
information about an owner's responsibilities and the rights and
options of an affected tenant.
   (3) In addition to the information provided in the notice to the
affected tenant, the notice to the affected public entities shall
contain information regarding the number of affected tenants in the
project, the number of units that are government assisted and the
type of assistance, the number of the units that are not government
assisted, the number of bedrooms in each unit that is government
assisted, and the ages and income of the affected tenants.  The
notice shall briefly describe the owner's plans for the project,
including any timetables or deadlines for actions to be taken and
specific governmental approvals that are required to be obtained, the
reason the owner seeks to terminate the subsidy contract or prepay
the mortgage, and any contacts the owner has made or is making with
other governmental agencies or other interested parties in connection
with the notice.  The owner shall also attach a copy of any
federally required notice of the termination of the subsidy contract
or prepayment that was provided at least six months prior to the
proposed change.  The information contained in the notice shall be
based on data that is reasonably available from existing written
tenant and project records.
   (d) The owner proposing the termination or prepayment of
governmental assistance shall provide additional notice of any
significant changes to the notice required by subdivision (c) within
seven business days to each affected tenant household residing in the
assisted housing development at the time the notice is provided and
to the affected public entities.  "Significant changes" shall
include, but not be limited to, any changes to the date of
termination or prepayment or the anticipated new rent.
   (e) This section shall not require the owner to obtain or acquire
additional information that is not contained in the existing tenant
and project records, or to update any information in his or her
records.  The owner shall not be held liable for any inaccuracies
contained in these records or from other sources, nor shall the owner
be liable to any party for providing this information.
   (f) For purposes of this section, service of the notice to the
affected tenants, the city or county, the city and county, the
appropriate local public housing authority, if any, and the
Department of Housing and Community Development by the owner pursuant
to subdivisions (b), (c), and (d) shall be made by first-class mail
postage prepaid.
   (g) Nothing in this section shall enlarge or diminish the
authority, if any, that a city, county, city and county, affected
tenant, or owner may have, independent of this section.
   (h) If, prior to January 1, 2001, the owner has already accepted a
bona fide offer from a qualified entity, as defined in subdivision
(c) of Section 65863.11, and has complied with this section as it
existed prior to January 1, 2001, at the time the owner decides to
sell or otherwise dispose of the development, the owner shall be
deemed in compliance with this section.
   (i) Injunctive relief shall be available to any party identified
in paragraph (1) or (2) of subdivision (a) who is aggrieved by a
violation of this section.
   (j) The Director of Housing and Community Development shall
approve forms to be used by owners to comply with subdivisions (b)
and (c).  Once the director has approved the forms, an owner shall
use the approved forms to comply with subdivisions (b) and (c).
   (k) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, which is enacted on or before January 1, 2011, deletes or
extends that date.
  SEC. 2.  Section 65863.11 of the Government Code is amended to
read:
   65863.11.  (a) Terms used in this section shall be defined as
follows:
   (1) "Assisted housing development" and "development" mean a
multifamily rental housing development as defined in paragraph (3) of
subdivision (a) of Section 65863.10.
   (2) "Owner" means an individual, corporation, association,
partnership, joint venture, or business entity that holds title to an
assisted housing development.
   (3) "Tenant" means a tenant, subtenant, lessee, sublessee, or
other person legally in possession or occupying the assisted housing
development.
   (4) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization, or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development and that represents the interest of at least a
majority of the tenants in the assisted housing development.
   (5) "Low or moderate income" means having an income as defined in
Section 50093 of the Health and Safety Code.
   (6) "Very low income" means having an income as defined in Section
50052.5 of the Health and Safety Code.
   (7) "Local nonprofit organizations" means not-for-profit
corporations organized pursuant to Division 2 (commencing with
Section 5000) of Title 1 of the Corporations Code, that have as their
principal purpose the ownership, development, or management of
housing or community development projects for persons and families of
low or moderate income and very low income, and which have a broadly
representative board, a majority of whose members are
community-based and have a proven track record of local community
service.
   (8) "Local public agencies" means housing authorities,
redevelopment agencies, or any other agency of a city, county, or
city and county, whether general law or chartered, which are
authorized to own, develop, or manage housing or community
development projects for persons and families of low or moderate
income and very low income.
   (9) "Regional or national organizations" means not-for-profit,
charitable corporations organized on a multicounty, state, or
multistate basis that have as their principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of low or moderate income and very
low income.
   (10) "Regional or national public agencies" means multicounty,
state, or multistate agencies that are authorized to own, develop, or
manage housing or community development projects for persons and
families of low or moderate income and very low income.
   (11) "Use restriction" means any federal, state, or local statute,
regulation, ordinance, or contract that, as a condition of receipt
of any housing assistance, including a rental subsidy, mortgage
subsidy, or mortgage insurance, to an assisted housing development,
establishes maximum limitations on tenant income as a condition of
eligibility for occupancy of the units within a development, imposes
any restrictions on the maximum rents that could be charged for any
of the units within a development; or requires that rents for any of
the units within a development be reviewed by any governmental body
or agency before the rents are implemented.
   (12) "Profit-motivated organizations and individuals" means
individuals or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, that carry on as
a business for profit.
   (13) "Department" means the Department of Housing and Community
Development.
   (14) "Offer to purchase" means an offer from a qualified or
nonqualified entity that is nonbinding on the owner.
   (b) An owner of an assisted housing development shall not
terminate a subsidy contract or prepay the mortgage pursuant to
Section 65863.10, unless the owner or its agent shall first have
provided each of the entities listed in subdivision (d) an
opportunity to submit an offer to purchase the development, in
compliance with subdivision (h).
   (c) An owner of an assisted housing development shall not sell, or
otherwise dispose of, the development in a manner that would result
in either (1) a discontinuance of its use as an assisted housing
development, or (2) the termination of any low-income use
restrictions that apply to the development, unless the owner or its
agent shall first have provided each of the entities listed in
subdivision (d) an opportunity to submit an offer to purchase the
development, in compliance with subdivision (h).
   (d) The entities to whom an opportunity to purchase shall be
provided include only the following:
   (1) The tenant association of the development.
   (2) Local nonprofit organizations and public agencies.
   (3) Regional or national nonprofit organizations and regional or
national public agencies.
   (4) Profit-motivated organizations or individuals.
   (e) For the purposes of this section, to qualify as a purchaser of
an assisted housing development, an entity listed in subdivision (d)
shall do all of the following:
   (1) Be capable of managing the housing and related facilities for
its remaining useful life, either by itself or through a management
agent.
   (2) Agree to obligate itself and any successors in interest to
maintain the affordability of the assisted housing development for
households of very low, low, or moderate income for either a 30-year
period from the date that the purchaser took legal possession of the
housing or the remaining term of the existing federal government
assistance specified in subdivision (a) of Section 65863.10,
whichever is greater.  The development shall be continuously occupied
in the approximate percentages that those households who have
occupied that development on the date the owner gave notice of intent
or the approximate percentages specified in existing use
restrictions, whichever is higher.  This obligation shall be recorded
prior to the close of escrow in the office of the county recorder of
the county in which the development is located and shall contain a
legal description of the property, indexed to the name of the owner
as grantor.  An owner that obligates itself to an enforceable
regulatory agreement that will ensure for a period of not less than
30 years that rents for units occupied by low- and very low income
households or that are vacant at the time of executing a purchase
agreement will conform with restrictions imposed by Section 42(f) of
the Internal Revenue Code shall be deemed in compliance with this
paragraph.  In addition, the regulatory agreement shall contain
provisions requiring the renewal of rental subsidies, should they be
available, provided that assistance is at a level to maintain the
project's fiscal viability.
   (3) Local nonprofit organizations and public agencies shall have
no member among their officers or directorate with a financial
interest in assisted housing developments that have terminated a
subsidy contract or prepaid a mortgage on the development without
continuing the low-income restrictions.
   (f) If an assisted housing development is not economically
feasible, as defined in paragraph (3) of subdivision (h) of Section
17058 of the Revenue and Taxation Code, a purchaser shall be entitled
to remove one or more units from the rent and occupancy requirements
as is necessary for the development to become economically feasible,
provided that once the development is again economically feasible,
the purchaser shall designate the next available units as low-income
units up to the original number of those units.
   (g) (1) If an owner decides to terminate a subsidy contract, or
prepay the mortgage pursuant to Section 65863.10, or sell or
otherwise dispose of the assisted housing development pursuant to
subdivision (b) or (c), the owner shall first give notice of the
opportunity to offer to purchase to each qualified entity on the list
provided to the owner by the department, in accordance with
subdivision (q), as well as to those qualified entities that directly
contact the owner.  The notice of the opportunity to offer to
purchase must be given prior to or concurrently with the notice
required pursuant to Section 65863.10 for a period of at least 12
months.  The owner shall contact the department to obtain the list of
qualified entities.  The notice shall conform to the requirements of
subdivision (h) and shall be sent to the entities by registered or
certified mail, return receipt requested.  The owner shall also post
a copy of the notice in a conspicuous place in the common area of the
development.
   (2) If the owner already has a bona fide offer to purchase from an
entity prior to January 1, 2001, at the time the owner decides to
sell or otherwise dispose of the development, the owner shall not be
required to comply with this subdivision.  However, the owner shall
notify the department of this exemption and provide the department a
copy of the offer.
   (h) The initial notice of a bona fide opportunity to submit an
offer to purchase shall contain all of the following:
   (1) A statement that the owner will make available to each of the
type of entities listed in subdivision (d), within 15 business days
of receiving a request therefor, the terms of assumable financing, if
any; the terms of the subsidy contract, if any; and proposed
improvements to the property to be made by the owner in connection
with the sale, if any.
   (2) A statement that each of the type of entities listed in
subdivision (d) has the right to purchase the development under this
section.
   (3) A statement that the owner will make available to each of the
type of entities listed in subdivision (d), within 15 business days
of receiving a request therefor, itemized lists of monthly operating
expenses, capital improvements as determined by the owner made within
each of the two preceding calendar years, the amount of project
reserves, and copies of the two most recent financial and physical
inspection reports on the development, if any, filed with the
federal, state, or local agencies.
   (4) A statement that the owner will make available to each of the
entities listed in subdivision (d), within 15 business days of a
request therefor, the most recent rent roll listing the rent paid for
each unit and the subsidy, if any, paid by a governmental agency as
of the date the notice of intent was made pursuant to Section
65863.10, and a statement of the vacancy rate at the development for
each of the two preceding calendar years.
   (5) A statement that the owner has satisfied all notice
requirements pursuant to subdivision (b) of Section 65863.10, unless
the notice of opportunity to submit an offer to purchase is delivered
more than 12 months prior to the anticipated date of termination of
prepayment.
   (i) If a qualified entity elects to purchase an assisted housing
development, it shall make a bona fide offer to purchase the
development.  A qualified entity's bona fide offer to purchase shall
identify whether it is a tenant association, nonprofit organization,
public agency, or profit-motivated organizations or individuals and
shall certify, under penalty of perjury, that it is qualified
pursuant to subdivision (e).  During the first 180 days from the date
of an owner's bona fide notice of the opportunity to submit an offer
to purchase, an owner shall accept a bona fide offer to purchase
only from a qualified entity.  During this 180-day period, the owner
shall not accept offers from any other entity.
   (j) When a bona fide offer to purchase has been made to an owner,
and the offer is accepted, a purchase agreement shall be executed.
   (k) Either the owner or the qualified entity may request that the
fair market value of the property, as a development, be determined by
an independent appraiser qualified to perform multifamily housing
appraisals, who shall be selected and paid by the requesting party.
All appraisers shall possess qualifications equivalent to those
required by the members of the Appraisers Institute.  This appraisal
shall be nonbinding on either party with respect to the sales price
of the development offered in the bona fide offer to purchase, or the
acceptance or rejection of the offer.
   (l) During the 180-day period following the initial 180-day period
required pursuant to subdivision (i), an owner may accept an offer
from a person or an entity that does not qualify under subdivision
(e).  This acceptance shall be made subject to the owner providing
each qualified entity that made a bona fide offer to purchase the
first opportunity to purchase the development at the same terms and
conditions as the pending offer to purchase, unless these terms and
conditions are modified by mutual consent.  The owner shall notify in
writing those qualified entities of the terms and conditions of the
pending offer to purchase, sent by registered or certified mail,
return receipt requested.  The qualified entity shall have 30 days
from the date the notice is mailed to submit a bona fide offer to
purchase and that offer shall be accepted by the owner.  The owner
shall not be required to comply with the provisions of this
subdivision if the person or the entity making the offer during this
time period agrees to maintain the development for persons and
families of very low, low, and moderate income in accordance with
paragraph (2) of subdivision (e).  The owner shall notify the
department regarding how the buyer is meeting the requirements of
paragraph (2) of subdivision (e).
   (m) This section shall not apply to any of the following:  a
government taking by eminent domain or negotiated purchase; a forced
sale pursuant to a foreclosure; a transfer by gift, devise, or
operation of law; a sale to a person who would be included within the
table of descent and distribution if there were to be a death
intestate of an owner; or an owner who certifies, under penalty of
perjury, the existence of a financial emergency during the period
covered by the first right of refusal requiring immediate access to
the proceeds of the sale of the development.  The certification shall
be made pursuant to subdivision (p).
   (n) Prior to the close of escrow, an owner selling, leasing, or
otherwise disposing of a development to a purchaser who does not
qualify under subdivision (e) shall certify under penalty of perjury
that the owner has complied with all provisions of this section and
Section 65863.10.  This certification shall be recorded and shall
contain a legal description of the property, shall be indexed to the
name of the owner as grantor, and may be relied upon by good faith
purchasers and encumbrances for value and without notice of a failure
to comply with the provisions of this section.
   Any person or entity acting solely in the capacity of an escrow
agent for the transfer of real property subject to this section shall
not be liable for any failure to comply with this section unless the
escrow agent either had actual knowledge of the requirements of this
section or acted contrary to written escrow instructions concerning
the provisions of this section.
   (o) The department shall undertake the following responsibilities
and duties:
   (1) Maintain a form containing a summary of rights and obligations
under this section and make that information available to owners of
assisted housing developments as well as to tenant associations,
local nonprofit organizations, regional or national nonprofit
organizations, public agencies, and other entities with an interest
in preserving the state's subsidized housing.

(2) Compile, maintain, and update a list of entities in subdivision
(d) that have either contacted the department with an expressed
interest in purchasing a development in the subject area or have been
identified by the department as potentially having an interest in
participating in a right-of-first-refusal program.  The department
shall publicize the existence of the list statewide.  Upon receipt of
a notice of intent under Section 65863.10, the department shall make
the list available to the owner proposing the termination or removal
of government assistance.  If the department does not make the list
available at any time, the owner shall only be required to send a
written copy of the opportunity to submit an offer to purchase notice
to the qualified entities which directly contact the owner and to
post a copy of the notice in the common area pursuant to subdivision
(g).
   (p) (1) The provisions of this section may be enforced either in
law or in equity by any qualified entity entitled to exercise the
opportunity to purchase and right-of-first-refusal under this
section, that has been adversely affected by an owner's failure to
comply with this section.
   (2) An owner may rely on the statements, claims, or
representations of any person or entity that the person or entity is
a qualified entity as specified in subdivision (d), unless the owner
has actual knowledge that the purchaser is not a qualified entity.
   (3) If the person or entity is not an entity as specified in
subdivision (d), that fact, in the absence of actual knowledge as
described in paragraph (2), shall not give rise to any claim against
the owner for a violation of this section.
   (q) It is the intent of the Legislature that the provisions of
this section are in addition to, but not preemptive of, applicable
federal laws governing the sale, or other disposition of a
development that would result in either (1) a discontinuance of its
use as an assisted housing development or (2) the termination of any
low-income use restrictions which apply to the development.
   (r) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, which is enacted on or before January 1, 2011, deletes or
extends that date.
